An online tutorial for investors, Investor Glossary, has offered this brief description of dividend dog methodology: "...[I]nvented to find the 10 stocks of the 30-stockDow Jones Industrial Average with the highest yield (dividend / price) and invest equally in each, [t]he Dowdividend theory also requires that you repeat this process once a year. This report presumed dividend dog methodology applied to any index and compared that index side by side with the Dow.

Below, the Arnold Dividend Contenders Index top dog selections for May/June were disclosed.

Dog Metrics Ranked 30 Dividend Contenders Stocks by Yield

David Fish's May 31 Contenders list (from here) contained stocks distinguished by having paid increasing dividends for 10 to 24 years. Contenders stocks listed below were ranked by yields calculated as of June 14 to reveal the top ten. Price and dividend data was sourced from Yahoo.com.

The balance of the top ten contenders included one technology firm, Communications Systems Inc. (NASDAQ:JCS) in eighth, one financials firm, Omega Healthcare Investors (NYSE:OHI), in ninth, and the only utility listed, PPL Corp. (NYSE:PPL) placed tenth to complete the top ten contenders dog show.

Dividend vs. Price ResultsCompared to Dow Dogs

Below is a graph of the relative strengths of the top ten Dividend Contender dogs by yield as of market close 6/14/2013 compared to those of the Dow. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividend.

(Click to enlarge)

Actionable Conclusion (1): Bulls Pursued Both Contender & Dow Dogs

The Contenders top May/June dividend payers maintained a bullish course. In the past month Contenders top ten dog dividend stayed even while price rose early 3.2%.

For the Dow dogs, meanwhile, projected annual dividend from $1k invested in each of the top ten dropped over 2.2% since April, while aggregate single share price popped up over 13.6%. Dow dogs increased their overbought condition as aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten by over $198 or 53%.

Since Contender dogs may not be all the blue chip high quality equivalents of the Dow list, and also include utilities, an additional gauge of upside potential was added to the simple high yield metric used to cull bargains.

Wall Street Wizard Wisdom Weighed Well

One year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment were used to compare ten stocks showing the highest upside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts was considered optimal for a valid mean target price estimate.

Actionable Conclusion Two (2): Analysts Calculate Over 7.24% Net Gain from Top 20Dividend ContenderDogs In 2014

Top twenty dogs from David Fish's Dividend Contenders index were graphed below to show relative strengths by dividend and price as of June 14, 2013 and those projected by analyst mean price target estimates to the same date in 2014.

A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock price upsides and net gains including dividends less broker fees as of 2014.

Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividends.

(Click to enlarge)

Yahoo projected an 11% lower dividend from $10K invested in this group while aggregate single share price was projected to increase over 10% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the last column on the charts. Three to nine analysts was considered optimal for a valid estimate.

The average net gain in dividend and price was over 16% on $1k invested in each of these ten dogs.

The stocks listed above were suggested only as decent starting points for your index dog dividend stock purchase research process. These were not recommendations. As a measure of broker analyst confidence in this index, only 3 stocks of the 20 top yielders (15%) showed any upside potential.

Disclosure: I am long DD, GE, INTC, JNJ, MCD, PFE, T, VZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer:This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

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